Volkswagen AG’s share price down, sells 2.7 billion dollars in preferred stocks to finance the acquisition of Scania AB

The largest car manufacturer in Europe – Volkswagen AG made an official statement today, revealing that it sold 2 billion euros (2.7 billion dollars) in preferred stock. The company explained that the proceeds gained by the sale are intended to be used for partly funding the 6.7-billion-euro acquisition of the Swedish truck manufacturer Scania AB.

One of the analysts working at Bankhaus Metzler – Mr. Juergen Pieper commented for Bloomberg: “The placement seems to have gone smoothly and the dilution is rather small. You can argue about whether or not this capital increase was really necessary as VW could have financed the transaction without it.”

According to Volkswagen AGs statement, a total of 10.5 million shares were bought by institutional investors at the price of 191 euros per share. This is a 2.4% discount compared to the shares closing price yesterday.

Last month, Volkswagen AG prolonged the deadline for the shareholders of Scania to accept or reject its takeover offer until Thursday this week. The acquisition of Scania AB is estimated at about 6.7 billion euros and would help the German car maker to expand its reach.

Volkswagen has been an owner of a considerable stake in Scania for a long period of time, but it now seeks to get full control of the company in order to consolidate and expand its commercial-vehicle operations. The company also considers to delist the Scania shares.

The preferred stock sale is a part of a larger funding strategy, which goal is to cover the total of 6.7 billion euros that Volkswagen needs in order to take full control of Scania. The acquisition is also considered beneficial, because it will provide Volkswagen AG with the opportunity to consolidate the alliance between its own commercial-vehicle division, Scania AB and MAN SA, which the company also controls.

Volkswagen AG was losing 1.51% to trade at 192.70 euros per share by 14:01 GMT, marking a one year change of +16.61%. According to the information published on the Financial Times, the 29 analysts offering 12-month price targets for Volkswagen AG have a median target of 220.00, with a high estimate of 300.00 and a low estimate of 160.00. The median estimate represents a 12.45% increase from the last price of 195.65.